Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's downgrades Australian bank subordinated debt on increasing bail-in risk

Global Credit Research - 05 Sep 2013

Sydney, September 05, 2013 -- Moody's Investors Service downgraded the subordinated debt (Lower Tier II) ratings and selected junior subordinated debt (Upper Tier II) ratings for the Basel II compliant securities of eight Australian banking groups. The banks' senior obligation ratings and their stand-alone baseline credit assessments were not affected.

Moody's removed uplift for systemic support from subordinated debt ratings in Australia, concluding a review commenced on 3 June 2013. As a consequence, the subordinated debt ratings of Australia's larger banks were lowered by two notches, while the subordinated debt ratings of regional banks were lowered by one notch.

The rating outlooks for all the banks are now stable. A list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

"The downgrade reflects the increasing international trend of selectively imposing losses on holders of junior-ranking securities (creditor "bail-in") as a pre-condition for an ailing bank to receive public-sector support", says Patrick Winsbury, a Moody's Senior Vice President.

"We recognize that Australian bank supervisors have, in the past, acted in a manner to support all bank creditors", adds Winsbury. "However, the global financial crisis has demonstrated that support can be provided selectively and bank recapitalisation costs shared with subordinated creditors without triggering any contagion, as was previously feared".

In crisis-hit countries, this was in some cases accomplished through the introduction of laws or regulations allowing authorities to impose losses on subordinated debt holders through bail-in or resolution regimes. In other cases, governments were able to convince investors to voluntarily enter into distressed exchanges without any such legal powers.

Moody's observes that the Australian bank regulator does not have the explicit legal power to selectively impose losses on bank creditors outside of a liquidation. However, as the Financial Stability Board noted in its 2 September 2013 report Progress and Next Steps Towards Ending "Too-Big-To-Fail", Australia has made substantive progress in the implementation of the Key Attributes of Resolution Regimes. For instance, larger banks have been required to prepare "living wills".

APRA also has the power to wind up and/or restructure an ailing bank's operations. In doing so, its primary mandate is to protect Australian depositors, ahead of creditors.

In Moody's view, in the case of one or more banks experiencing severe stress -- which their high ratings indicate to be a low probability event -- such recourse could be used to coerce subdebt holders into a distressed exchange, if not for the outright imposition of losses on them outside of liquidation.

"Accordingly, while some systemic support may still be available for subordinated debt in Australia, we view its predictability to have declined to the point where it is no longer appropriate to incorporate any uplift in the subordinated debt ratings of Australian banks", concludes Winsbury.

This rating action relates only to Moody's view on the potential for systemic support for the banks' junior securities. It does not reflect any change in the banks' intrinsic credit quality. Moody's continues to rate Australian banks amongst the very strongest in the world on a stand-alone basis. Additionally, the rating agency continues to incorporate the potential for systemic support into the ratings of their senior obligations.

BACKGROUND

In recent years, losses have been imposed on the holders of junior securities during the resolution of troubled banks in crisis-hit countries. In the majority of cases, investors have suffered losses as a result of distressed exchanges, which do not necessarily require a developed resolution framework to be in place. Furthermore, experience has shown that such a framework can be developed quickly at times of stress.

As a consequence, Moody's approach globally is now to assume, as a starting point, that no government support would be extended to the subordinated debt holders of a distressed bank, except where particular circumstances justify.

In the case of Australian banks, Moody's concluded that Basel II compliant subordinated debt ratings should appropriately be positioned in line with its regular global approach. A detailed rationale for this decision can be found in a forthcoming report entitled "The World Has Changed: The Support Probability for Bank Subordinated Debt in Asia-Pacific Has Significantly Diminished".

RATINGS AFFECTED

Australia and New Zealand Banking Group:

Subordinated debt: downgraded from (P)Aa3/Aa3 to (P)A2/A2

Junior subordinated debt: downgraded from (P)A2/A2(hyb) to (P)A3/A3(hyb)

Commonwealth Bank of Australia:

Subordinated debt: downgraded from (P)Aa3/Aa3 to (P)A2/A2

Bank of Western Australia Ltd (Original issuer of debt assumed by Commonwealth Bank of Australia):

Backed subordinated debt: downgraded from Aa3 to A2

National Australia Bank:

Subordinated debt: downgraded from (P)Aa3/Aa3 to (P)A2/A2

Junior subordinated debt: downgraded from (P)A1/(P)A2 to (P)A3/(P)A3

Westpac Banking Corporation:

Subordinated debt: downgraded from (P)Aa3/Aa3 to (P)A2/A2

Junior subordinated debt: downgraded from (P)A2/A2(hyb) to (P)A3/A3(hyb)

Westpac Banking Corporation (London Branch)

Subordinated debt: downgraded from (P)Aa3 to (P)A2

Junior subordinated debt: downgraded from (P)A2 to (P)A3

St.George Bank Limited (Original issuer of debt assumed by Westpac Banking Corporation):

Subordinated debt: downgraded from Aa3 to A2

Westpac Trust Capital NZ Limited:

Subordinated debt: downgraded from (P)Aa3 to (P)A2

Macquarie Group Limited:

Subordinated debt: downgraded from (P)Baa1 to (P)Baa3

Macquarie International Finance Limited:

Subordinated debt: downgraded from (P)Baa1 to (P)Baa3

Macquarie Bank Limited:

Subordinated debt: downgraded from (P)A3/A3 to (P)Baa2/Baa2

Suncorp-Metway Limited:

Subordinated debt: downgraded from (P)A2 to (P)A3

Junior subordinated debt: downgraded from (P)A3/A3(hyb) to (P)Baa1/Baa1(hyb)

Pref. Stock Non-cumulative: confirmed at Baa2(hyb)

Bank of Queensland Limited:

Subordinated debt: downgraded from (P)Baa2/Baa2 to (P)Baa3/Baa3

Bendigo and Adelaide Bank:

Subordinated debt: downgraded from (P)A3/A3 to (P)Baa1/Baa1

The principal methodology used in these ratings was Global Banks published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Patrick J Winsbury
Senior Vice President
Financial Institutions Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100

Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100

Moody's downgrades Australian bank subordinated debt on increasing bail-in risk
No Related Data.
© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY’S (“MOODY’S PUBLICATIONS”) MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for “retail clients” to make any investment decision based on MOODY’S credit rating. If in doubt you should contact your financial or other professional adviser.

For Japan only: MOODY'S Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of MOODY'S Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
© 2015 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: